Does StartUp America Matter?

Posted by Jeff Carter
on December 13th, 2011

One of the government programs started under the Obama administration is Start Up America. It has lead to efforts in various states. Today, they are unveiling Start Up Iowa. The key question to ask comes down to this. Is the money spent on Start Up America offset by an increase in GDP growth from start ups?

The short term answer is “No”, because for any real measurement to take place it will take 5-7 years. Start Ups are not accretive to the economy overnight.

However, the long term answer might be different depending on a lot of variables. The one bad thing about government programs is they never end. I really don’t care that this one says it’s not spending taxpayer dollars, it is using government resources so there is a cost that corresponds with that.

As long as the organization keeps its goals extremely broad, and does some very simple tasks, it should be a net positive for America. However, if it starts to take a blueprint and replicate it similarly area by area of the country we are inviting trouble. Micromanaging by any government organization is inefficient. Iowa is not like Illinois even though the two states border each other and they grow corn. They have different strengths and weaknesses and have evolved over time to be good at different things.

There are a lot of platitudes one could assume about Start Up America. Lofty sentences and goals. But the truth is that starting up companies takes capital, money. Without people willing to risk capital in unproven businesses and business models, nothing happens. The present occupant of the White House has destroyed wealth, reducing the ability of people to take risks. Not only have his policies destroyed wealth, he has personally attacked it. That’s not conducive to starting up a country.

Starting a company isn’t easy work. It’s really, really hard. It will be the most challenging thing you do, but even in failure you find that it can be extremely rewarding. There is a theory of motivation out there called Hackman-Oldham Theory. There are a lot of variables to it, but essentially the more self determined a job is the more satisfaction you get from it. Start ups are the ultimate in self determination!

Governments shouldn’t fund store fronts or start ups. What can they do?

Have angel investment tax credits that are reciprocal to other states. No one state has the market cornered on good ideas.
Have exit tax credits. If a company exits successfully, the investor pays 0% tax. They invest in enough losers so govts ought to give angels a break when they have a winner.
Make sure the streets are paved, public transportation works, regulation is light, and rules on hiring and firing lax. Make it cheap to employ people
Make it cheap and easy for private companies to create electronic structure; Cell towers, bandwidth, connectivity (The Loop in Chicago has terrible cell service)
Make connections for companies-at no cost political or monetary
Become a customer, and make it easy for the start up-selling to a government body is a huge draw on working capital.
Begin talking about and creating a culture of entrepreneurship. Instead of serving soup, sponsor Lemonade Days
Create educational incentives to churn out engineers, mathematicians, scientists and not fill in the blank-Studies majors. We need less lawyers and sociologists and more technical people

That is pretty much it. The market will determine the winners and losers.

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